Energy Department faulted for selling surplus too cheaply

Trucks cost 17 cents each

drill rig let go for $50,000 was resold at $3.9 million

The Energy Department sold 23 trucks for 17 cents each, a $9,000 copier for a nickel and a drilling rig for $50,000, just a few examples of hundreds of deals that squandered government resources, federal investigators have found.

The sales, which included motor homes, laboratory equipment and cranes, occurred at the Energy Department's Nevada Test Site, the sprawling installation north of Las Vegas where nuclear bombs were once tested underground.

Sales were made under a federal program intended to give economic help to communities around Energy Department sites, but the agency did not attempt to determine the fair market value of the items and never confirmed that they would assist the local economy, according to an audit by the Energy Department's inspector general.

The equipment sales program was established in 1994, when the nation's nuclear weapons complex's rapid shrinking was damaging some local economies. That is no longer the case. In recent years, the annual budget for nuclear weapons has jumped to $5.89 billion, up more than $1 billion from its low point in the 1990s.

The audit marks at least the second time that Energy Department operations have been faulted for financial mismanagement in recent months.

The FBI is investigating financial fraud at the Energy Department's Los Alamos National Laboratory in New Mexico. A series of congressional investigations also found that Energy Department contractors had fired investigators brought in to clean up the fraud.

Used equipment sales have caused trouble at the Energy Department before, said Peter Stockton, an investigator for the Project on Government Oversight, a watchdog group that has made a number of disclosures about management practices at the department.

In 1997, the Energy Department's Sandia National Laboratory sold an Intel Corp. supercomputer to a Chinese national for $31,000, according to an investigative report.

After learning that the computer, among the 100 fastest in the world at the time, would be exported to China, the Energy Department demanded to repurchase the computer. But it had to pay $89,000 for it.

"They have a management problem at Energy," said Stockton, who formerly conducted special investigations for the Energy Department under the Clinton administration. "A lot of this stuff is outrageous."

The new report said equipment sales at the Nevada Test Site were "not in the best interest of the taxpayers." They were all made to one community organization, the NTS Development Corp. of Las Vegas.

The 23 trucks were in good condition and worth a total of $448,000, auditors found. The copying machine was less than a year old. In other cases, the test site sold equipment that was not surplus and later had to be replaced at full cost.

That included laboratory equipment at the test site that Lawrence Livermore National Laboratory in California had requested but never received. Livermore subsequently had to buy new equipment for $2.5 million.

The report focused on one particular sale involving a drilling rig. NTS bought the rig for $50,000 and paid a subcontractor $71,000 to inspect and clean it. NTS then sold the rig for $248,000 to an equipment broker in Texas, who has since listed it for sale for $3.9 million. The report found that the deal not only squandered government assets, but it failed to provide a benefit to the local community.

Tom Williams, NTS executive director, said many of the items his organization acquired at low cost were in "pretty bad shape. In a lot of cases it wasn't worth much more than scrap."

NTS, which has only three employees, has sponsored a number of economic projects at the test site to help offset the employment reductions, Williams said. But most of the projects have failed. The one current project employs 30 workers, who clean radioactivity off equipment, he said.

The test site is part of the National Nuclear Security Administration, an agency inside the Energy Department. The facility employs 3,000, down from its peak of 12,000.

Nancy Harkess, a spokeswoman at the Nevada Test Site, said all of the sales were done within government guidelines that existed at the time, and the intent was to help offset the loss of 9,000 jobs at the facility when nuclear testing was stopped in the early 1990s.

The trucks and much of the other equipment were generally in poor condition, and the hope was that they could provide NTS with resources to carry out its mission, Harkess said.

Ralph Vartabedian is a reporter for Los Angeles Times, a Tribune Publishing newspaper.